New York Regulators Impose $15 Million Fine Over Life Notice Problems

The case involves a block of Aviva life policies acquired by one company and reinsured by another.

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Maria Vullo (Photo: NYDFS)

The New York State Department of Financial Services has imposed a $15 million fine on one life insurer in connection with premium notice and annual statement problems affecting about 15,000 policyholders, officials said today.

The department has also required another insurer to make remedial efforts that could have a total value of about $40 million insurers said.

The insurers involved, Athene Life Insurance Company of New York and First Allmerica Financial Life Insurance Company, entered into a consent order concerning the policies with the New York department, officials said.

Athene, which was formerly known as Aviva USA, is an Iowa-based subsidiary of Athene Holding Ltd. of Bermuda.

First Allmerica is a subsidiary of Commonwealth Annuity and Life Insurance Company, a reinsurance unit of Global Atlantic Financial Group Ltd. of Bermuda.

Athene Holding acquired Aviva USA in 2013. When Athene acquired Aviva USA, it had First Allmerica reinsure a block of life policies. First Allmerica hired another company to shift the Aviva USA policies to administration policies, Athene said in an announcement of the signing of the consent order.

New York state officials said in an announcement of the consent order that, from 2015 through 2017, after First Allmerica outsourced administration of the policies, Athene failed to ensure that all policyholders received the required premium due notices, cash surrender value notices, annual reports and annual privacy notices.

Athene Life Insurance Company of New York offered term life, whole life, universal life and indexed universal life products, according to a New York state market conduct examination report related to the consent order.

The company’s primary distribution channel was through brokerage general agents.

Examiners found problems with a variety of advertising, sales and underwriting activities as well as with premium notices and annual notices, according to the market conduct examination report. Officials said, for example, that the insurer was unable to provide preliminary life application information for half of the eight term life files requested. The advisory notices in the files that were available failed to give applicants the required information about matters such as how to seek an unconditional refund for a new policy, officials said.

Examiners also found problems with all 20 of the long-term care insurance explanation of benefits forms reviewed, officials said. None of the forms provided a description of claim denial appeal rules and procedures, according to the market conduct examination report.

Regulators at the California Department of Insurance said earlier this month that they are taking legal connection because of concerns about how Athene life insurance block administration problems are affecting about 50,000 life policies issued to California residents.

Doug Ommen, the Iowa insurance commissioner, said regulators have been working together, through the National Association of Insurance Commissioners, to review the situation since last year.

New York State Financial Services Superintendent Maria Vullo said in a statement that insurers that reinsure policies are still responsible for meeting the policy obligations.

“Consumers must be able to trust that insurers are in compliance and are providing the required levels of service for life insurance policies,” Vullo said. “Given the increased frequency with which insurers use third-party providers, insurers will be held accountable for any failures to meet their legal obligations, even if that failure was the fault of a third-party provider.”

Athene said in its announcement of the consent order that it believes First Allmerica has financial responsibility for the policy block and is responsible for meeting the block administrative services requirements.

“The agreements also provide for indemnification to Athene,” Athene said. “The activity to the consent order does not involve Athene’s new business, which is issued and administered by a separate New York entity, administration system and procedures. Athene has a strong commitment and track record of providing high quality services to its policyholders and will continue to work with [First Allmerica] as the remediation matters are implemented.”

Global Atlantic said in a statement that the company settled an examination by the New York department in connection with a system conversion of a block of life insurance policies acquired from Athene in 2013.

Global Atlantic hired an outside technology company to administer the conversion, Global Atlantic said in the statement.

“Unfortunately, during this process we were unable to service many of the policies properly for a period of time,” Global Atlantic said. “We have provided regular updates to [the New York department] and have fully cooperated with the department throughout the examination. We are doing everything possible to ensure policy owners’ interests are protected, and throughout this process policyholder benefits remained in force and we have paid claims.”

Edtor’s Note: This article has been updated to include a response from Global Atlantic.

Allison Bell

Allison Bell, ThinkAdvisor's insurance editor, previously was LifeHealthPro's health insurance editor. She has a bachelor's degree in economics from Washington University in St. Louis and a master's degree in journalism from the Medill School of Journalism at Northwestern University. She can be reached at abell@alm.com or on Twitter at @Think_Allison.

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